September 2002

Rethinking The Core Switch

BY DAVID HEARD

These are sobering times for our society and our industry. The news brings constant reports of potential global flashpoints, of dirty bombs and corporate integrity bombs, of war and worry and economic strife. In the telecom business, poor economic indicators and countless revised forecasts make many participants ready to crawl under their desks and assume the fetal position.

So maybe this is a good time to take a deep breath, and focus on the basics of telecommunications.

While no reasonable person can deny the reality of our current marketplace, things are seldom as bleak as they seem. If we examine the fundamentals of the telecom industry, in the context of historical technology development cycles, we can gain a more honest and accurate perspective on our situation. Sure, the traditional telecom suppliers continue to struggle. Yet even as you read this sentence, consumers the world over are touching the networks in growing numbers, with a variety of new devices, and to access an exciting new menu of services.

TRENDING TO GROWTH
According to virtually every reliable research finding, subscriber usage patterns for both data and voice will continue to drive the dramatic growth in network traffic volumes. Last year in the United States, wireless traffic grew by 23 percent, data traffic by 39 percent, and long-distance and local access traffic by 25 percent. Even basic applications are undergoing a dramatic usage shift. Five years ago, the average size of a typical e-mail message was just 2.5 kilobytes, while today a typical message is now a bandwidth-eating 286 kilobytes in size. The number of e-mails in the same period has risen from about 200 billion to more than 1.5 trillion per year in the United States alone. Cellular is set to topple the 1 billion subscription mark globally by 2003, and driven by the flexibility of ubiquity, it is increasingly becoming a true challenger to POTS. Even plain long-distance service will add 700 billion calls to U.S. networks.

As service providers introduce �all you can eat� pricing models, and as consumers increasingly use their mobile phones for more of their telecom conversations, Voice over Packet will constitute a significant and growing network traffic element. Industry analysts are projecting that Voice over Packet will generate more than $7 billion in services revenue domestically by 2005.

Thanks to this surge in network traffic, we are beginning to see a true convergence of voice and data communications, and the lines are blurring between fixed and mobile and between voice and data. At the same time, applications are increasingly linked to these converged voice and data service capabilities. More and more consumers now use multiple access technologies, from mobile phones to wireless notebooks and personal digital assistants. Growing demand for these advanced applications, as well as the need for increased operating efficiencies, are driving the most fundamental change in our industry in more than 25 years, forcing the migration from circuit- to packet-based networks. And in an industry where earnings per share (EPS) determines success, this migration and convergence would be the key for yielding dividends on a sustained basis.

To position their networks to more fully exploit this emerging reality, carriers are moving to adopt core switching technologies that can bridge voice and data, fixed and mobile in both the current and the next generation. Switching will be the fulcrum of the circuit-to-packet evolution, and to envision the networks that will support a resurgent telecom industry, we must understand the nature of this new class of switching platform.

BACK TO BASICS
Let�s first focus on the fundamentals of our business: The consumers, the service providers, and the telecom networks.

Subscribers. Telecom consumers care about service breadth, cost, and quality. They are protocol agnostic and they don�t care or want to know about whether those services are delivered to them on TDM, FR, ATM, or IP. They want connectivity, prices they can understand and afford, and cool new applications. They now touch the networks via a growing variety of devices. And because so much is available to them from so many potential providers, today�s subscriber is more willing than ever to jump from service provider to service provider to take advantage of the latest services at the lowest prices.

Service Providers. Those hard facts create both challenge and opportunity for service providers. To survive today�s challenging environment, and to be ready for the coming boom in packet-based traffic, service providers need networks that are robust and scalable, that allow them to drive down costs while introducing popular new applications, and that give them the flexibility to manage the tempo of the circuit-to-packet evolution. Because no carrier can survey a city block and accurately predict who will use IP- versus TDM-based services in the next year, today�s network service providers need infrastructure that can scale to seamlessly handle sustained growth of any traffic mix. Recently published reports predict average annual growth rates of 20 percent for long-distance, 25 percent for wireless, and 40 percent for data. On top of this, the solution must provide significant efficiencies to derive maximum cost benefit to improve EPS even in the current trend of flat or shrinking revenues.

Networks. So what are the most basic requirements that network operators will need to survive and prosper in the telecom environment of the future? To begin with, network operators must deploy true carrier-class switches that can handle any type of traffic, incorporate both trunk and line functionality, and a circuit to packet migration approach that has a positive impact on EPS.

They will need switches capable of delivering both legacy- and next-generation capabilities, including the core applications of enhanced voice switching, integrated voice and data switching, and voice over broadband functionality.

To meet these ambitious demands, an entirely new class of software-driven telecom switch has now emerged. It delivers both circuit (TDM) and packet functionality on a single platform, so operators can deploy this solution in TDM-only mode to cap legacy switch networks. Then, as their need for additional traffic capacity or transport efficiency grows, this new type of platform upgrades quickly and easily to support voice over packet in a converged network environment.

In this architectural approach, the TDM switch matrices and interfaces continue to handle legacy circuit-switched traffic while voice over packet capabilities are deployed. Hence, operators can evolve to a converged packet-driven network with no service interruptions. This highly flexible design also supports both centralized and distributed architectures, allowing operators to deploy the most productive and cost effective network model in virtually any market situation.

This carrier-grade approach is also designed to support a wide range of high-value applications, like full-feature trunk applications (tandem, PRI offload) and line applications (Class 5, VoIP/VoDSL). It will satisfy all regulatory requirements of a traditional legacy system, including Local Number Portability, CALEA, and E911. It will also provide complete feature transparency to the existing infrastructure including full back-office integration. As such, it enables a seamless evolution from today�s circuit-driven network to the more powerful and flexible packet-driven technologies of the future, including IP and ATM networks.

This next-generation softswitch solution consists of three key elements:

• An open feature exchange includes a media gateway controller, a signaling gateway, and an application server;
• A broadband office exchange provides high-density media gateway functionality; and
• An element management system provides a common GUI-based control for all switching activities.

Capacity and scalability are, of course, important qualities in any carrier-grade switching solution. Operators need an architecture that can scale up quickly and easily from a few thousand to the ability to serve several million subscribers. In optimum deployments, this new class of switch might hold from 100,000 to 200,000 TDM and/or packet ports in a single frame and can scale to support between three million and six million ports in a single system.

Cost is another bottom-line consideration for every player in today�s telecom marketplace. The fact that the traffic keeps rising and the average revenue per user keeps shrinking, the carriers are focused on reducing their CapEx and OpEx more than ever before. For example, to upgrade an existing circuit switch to handle 100,000 ports, the service provider today spends anywhere between $6 million and $8 million, while the operating expenses (space, power, maintenance, sparing, etc,) are two-to-three times that amount annually. For a similar configuration, the new class of switch not only halves the capital expense, it delivers a huge OpEx reduction � by some estimates as much as 70 percent. While providing these economic benefits, this new class of switch also supports existing applications and paves the way for next generation applications on the same platform.

BETTER DAYS
The power and flexibility of these new core switching solutions will play an important role in the resurgence of the telecommunications industry. And make no mistake, while our industry has struggled, it is following a path that is familiar to other industries that underwent similar business and technological upheavals.

Consider the transition from the traditional mainframe-only computing environment to our current mixed and distributed computing landscape. When distributed computing was first introduced, many observers predicted that computing costs would rise while quality and reliability would fall. But just the opposite took place. While mainframes still provide valuable service in many situations, distributed computing networks deliver affordable and dependable performance in most corporate IT environments.

But before achieving that level of success, the distributed computing industry underwent a painful period of dislocation. At one time, companies building enterprise-level computing solutions numbered in the triple digits. But by the end of the distributed computing shakeout, maybe 10 major computer manufacturers remained.

Similar dynamics are shaping the future of the telecom sector. While traditional switching suppliers continue to retrench and reduce their R&D expenditures, operators and service providers need innovative, cost-efficient switching technologies capable of meeting the network demands of tomorrow.

Given current market dynamics, even next-generation switch suppliers are enduring a painful and ongoing shakeout. While there were once more than 110 active competitors in the softswitch space, today a small handful of those have survived. And, like the successful few left standing after the distributed computing shakeout, suppliers that survive the current telecom downturn will be those that deliver the very highest level of performance and value.

So while times are tough right now, the best advice is to focus on the fundamentals. Consumer demand for telecom services is healthy and growing. Operators can leverage these new core switching solutions to connect subscriber demand with their network capabilities, while opening a graceful pathway to the packet-based future. c

David Heard is Chief Executive Officer of Santera Systems, a leading source of next-generation switching technologies. For more information, please visit the company online at www.santera.com.

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